Definition, Types and Benefits of Insurance – It is necessary for you to understand the meaning of insurance, insurance benefits, and types of insurance. Because, for some people, insurance is still underestimated and reluctant to join. The benefits are huge for future lives.
Moreover, the cost of living is increasing every year. Be it from hospital costs, education, and so on. However, with the insurance the burden can be reduced. This is because its function is indeed as a protection against all risks that could occur.
Table of Contents
Definition, Types and Benefits of Insurance
Definition
Insurance is a form of agreement between the insured and the insurer. The insured will have to pay dues to the insurer. The goal is to obtain compensation for financial risks that may occur.
What are the elements of insurance?
The insurer is an insurance company. Meanwhile, the insured is a customer or insurance owner. There are 3 main elements in it, namely policies, premiums, and insurance claims.
- Insurance premiums are dues that must be paid by customers during the agreed period of time. Usually premiums can be paid on a monthly, semesterly, to yearly basis.
- Meanwhile, an insurance policy is a valid document that governs the insurance agreement. Starting from the value of benefits, the amount of premiums, risks covered, to exceptions (risks that are not covered by insurance). Insurance policies are legal and legally binding. If any party violates the policy rules, then the other party has the right to terminate the cooperation or even sue the party.
- Insurance claim is the process of submitting officially to the insurance company when the customer experiences the risk covered in the insurance policy. If the insurance claim is made in accordance with the provisions stated in the policy, then the insurance company will provide a sum of money as compensation for the financial risks experienced by the customer.
How Does Insurance Work?
Insurance work by pooling with each other the sources of a a great deal of people who have similar risks to make sure that the couple of people who experience loss are secured.
When obtain an insurance policy and pay an insurance costs, you are placing a little of your very own cash into that swimming pool.
If your residential property is unintentionally lost, taken, harmed or ruined, and you have a basic insurance coverage that covers the home for those dangers, you can make a case as well as draw on that swimming pool of cash to help pay for fixings or substitutes costs.
This may allow you to avoid paying the full cost of replacing, fixing, restoring or bring back important things if they are lost, stolen, harmed or destroyed. It likewise indicates you can avoid winding up with a big financial obligation or responsibility.
When you pay an insurance policy premium, you will have access to the pool of cash only if you claim a loss that is covered by your insurance coverage.
It is feasible that a person who has actually paid an insurance costs for years could never make an insurance claim.
When you get an insurance coverage, your insurer promises it will pay you for the sort of loss stipulated in the plan– such as a mishap, burglary, loss or catastrophe– by funding repairs or substitute of items, as much as the limitation of your policy, or sometimes by supplying a cash money negotiation.
Each insurer’s policies have different regulations regarding what the policy will cover. Exclusions may use, so you must read your policy very carefully and consult if you’re unsure what your policy will cover.
Insurance Benefits
You need to know what are the benefits of insurance in general. That way, you will get to know more about how beneficial this is to yourself.
1. As Savings and Investments
If you register as an insurance customer, then at the end of the contract will get a guaranteed return on investment. In addition, it also offers flexibility or leeway in choosing a coverage term.
Read : Definition, Types and Benefits of Homeowner Insurance
In general, the choice is about 5, 7, to 10 years. The amount of premium also includes a single premium. Where the nominal is relatively affordable and has the opportunity to get free administration fees.
2. Provide Peace
Insurance offers protection against risks that occur later in life. This can bring a sense of calm, because there is no need to worry anymore if something unexpected happens. Although the handling of losses is based on the type of insurance you choose. However, it can at least bear some of the burden of deferred costs.
3. Help Manage Finances Better
Regular premium payments indirectly have taught you how to manage finances. The trick is to set aside some of the existing income. People who cannot afford to save will certainly feel this way. Because, spending money is not just for something temporary. However, it is also a support for future life.
4. Minimize Losses
By having insurance, it can minimize the cost of losses if you experience unexpected events. So, the needs will remain fulfilled stably. Because, some of the costs have been borne by the insurance company to compensate for the losses you experience. If there is no insurance, it could be confusing to obtain dependents from where.
What are the types of insurance?
There are many types of insurance available. The risks covered by each insurance are different. However, here are basically some of the most common types of insurance that people have:
1. Health Insurance
This type is insurance that handles problems related to health. For example, treatment, surgery costs, hospitalization costs, and so on. Therefore, you must know in detail about this insurance. The reason is, health insurance is further divided into various types that also affect the facilities obtained:
a. Outpatient
This type of health insurance deals with problems related to outpatients. For example, lab checks, medical diagnoses, and others that do not require a stay.
b. Hospitalization
This insurance is useful in the cost of treatment during hospitalization. With this, you will get maximum care and supervision from your doctor and medical team. In addition, it is also useful related to things involving surgical operations. In general, the process will take a long time and the bill is added up with hospitalization.
c. Group
This insurance handles or provides protection in a group. For example, health insurance for one family. So, everyone from the family will get the same facilities.
d. Personal
This type is inversely proportional to group insurance. In a sense, only handle individuals or individuals. So, the insurance you have cannot facilitate others.
e. Private
Usually, this insurance manager is a private entity. In private insurance, you have to pay the premium in full. The amount also depends on the service you get.
f. Government
This government health insurance is better known as BPJS (Health Social Security Organizing Agency). This insurance is managed by the government and includes the principle of mutual cooperation.
So, those who deserve it are only certain people. The goal is to help people with lower-middle economies. The facility also has limitations than private insurance.
2. Life Insurance
It is an insurance that handles the risk of death. You can buy this insurance for yourself or someone else. Life insurance also has several types as follows.
a. Term Life Insurance
As the name implies, this insurance only provides protection within a certain period. Typically, the time ranges from 5, 10, to 20 years with fixed premiums and relatively cheap. That way, this insurance is suitable for those of you who have a limited budget.
The benefit of this type is that it can determine for itself the value of the premium to be paid. In addition, the premium you have paid will not be forfeited even if there is no claim at all. Then, after the contract is completed, the money will return completely.
b. Whole Life Insurance
This type of insurance provides lifelong protection, although generally only limited to 100 years. This insurance is suitable for those of you who do not have dependents. In addition, it also wants to obtain other benefits not only for death compensation. Because, this insurance you can make long-term savings. At the same time to support emergency needs, such as paying hospital costs and so on.
c. Endowment
This insurance has two functions at once, namely as term life insurance and savings. So, you can withdraw cash before the contract period ends.
d. Link Unit
This type is a combination of insurance and investment benefits. There are several additional insurance offered, such as income replacement, health, and others.
3. Education
That is an insurance that provides protection against the future education costs of children. This insurance is a combination of investment and term life insurance products. So, it is not only the cost of children’s education that is guaranteed. However, parents also get life protection as education insurance holders. You also need to know the types of insurance. Among them are:
a. Endowment
The benefits of this insurance not only focus on the child’s education, but also on savings. Therefore, you can take the premium money collected within a certain period of time.
All right, so now you have read about the definition, types and benefits of insurance. What’s next? Give me a quick backup and let us know if you already understand the comments column below now.
